Tankerska plovidba Group Consolidated Annual Financial Statements and Independent Auditor`s Report for 2011

Transcription

1 Tankerska plovidba Group Consolidated Annual Financial Statements and Independent Auditor`s Report for 2011

2 CONTENTS PAGE Responsibility for financial statements 3 Independent Auditor`s Report 4 Financial Statements: Consolidated income statement and statement of comprehensive income 6 Consolidated balance sheet 8 Consolidated statement of cash flows 9 Consolidated statement of changes in equity 11 Notes forming part of the consolidated financial statements 12-45

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4 INDEPENDENT AUDITOR`S REPORT TO THE SHAREHOLDERS OF TANKERSKA PLOVIDBA GROUP From 5 th October 2011 to 27 th June 2012 we have audited the consolidated financial statements of TANKERSKA PLOVIDBA shipping stock company, Zadar ( the Company ) and its subsidiaries (together the Group ) which comprise the accompanying consolidated balance sheet as at 31 st December 2011, consolidated income statement and statement of comprehensive income for 2011, consolidated statement of cash flows and consolidated statement of changes in equity for the year then ended, and a presentation of significant accounting policies and notes to the consolidated financial statements. The statements are stated on page 6 up to page 45. Management`s responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards applicable in the European Union. These responsibilities include: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the determined circumstances. Auditor`s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are without material misstatement. An audit involves performing procedures in order to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedure selected depends on the auditor`s judgement, including the assessment of the risks of material assessments. In making those risk assessments, the auditor considers internal control, relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to determine audit procedures that are appropriate in the existing circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity`s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of consolidated financial statements. We believe that the audit evidences we have obtained are sufficient and appropriate to provide a basis for our audit opinion. Tankerska plovidba Group 4

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6 CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME (For the year ended 31 December 2011) Description Note Jan-Dec 2011 Jan-Dec /10 +/- % =4/5 Income statement 1. REVENUES FROM ORDINARY ,1 ACTIVITIES 1.1. Sales revenue , Other revenues ,4 2. COSTS FROM ORDINARY ( ) ( ) -0,7 ACTIVITIES 2.1. Operating costs and cost of goods sold 5 ( ) ( ) 23, Personnel costs 6 ( ) ( ) -8, Depreciation 7 ( ) ( ) -8, Value adjustment and provisions (0) (0) Other costs 8 ( ) ( ) -8,7 3. RESULT FROM ORDINARY ACTIVITIES 4. NET FINANCIAL (EXPENSES)/REVENUES ( ) ,2 9 ( ) , Financial revenues , Financial expenses 9 ( ) ( ) 49,1 5. PROFIT/(LOSS) FROM INVESTMENT IN ASSOCIATES 6. PROFIT/(LOSS) FROM ORDINARY ACTIVITIES BEFORE TAX ,0 ( ) ,6 7. INCOME TAX 10 ( ) ( ) 23,1 8. ATTRIBUTED TO MINORITY INTERESTS 9. PROFIT/(LOSS) FROM CONTINUING OPERATIONS 10. PROFIT(LOSS) FROM DISCONTINUING OPERATIONS ( ) (92.813) 70,6 ( ) , PROFIT/(LOSS) FOR THE PERIOD ( ) ,7 Earnings/(losses) per share () 11 (144,65) 129,58-211,6 Tankerska plovidba Group 6

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9 CONSOLIDATED STATEMENT OF CASH FLOWS (For the year ended 31 December 2011) Description Note Jan-Dec 2011 Jan-Dec /10 +/- % =4/5 I. OPERATING ACTIVITIES 1. Profit/loss for the period after tax ( ) ,3 Adjustments for: 2. Income tax expense ,1 3. Depreciation of property, plant ,3 and equipment 4. Depreciation of intangible assets ,8 5. Profit/loss of investment in 14 ( ) ( ) -13,0 associates 6. Profit/loss on sale of property, ( ) ( ) -32,0 plant and equipment and intangible assets 7. Profit/loss on sale of securities 9 0 (4.619) and shares 8. Interest expense/revenue (net) ,4 9. Impairment in trade receivables 0 0 Operating profit before working capital changes ,5 10. Increase/decrease in inventories ( ) ( ) 69,4 11. Increase/decrease in current ( ) ( ) 104,4 receivables 12. Increase/decrease in current ,9 liabilities 13. Other increase/decrease of ( ) ( ) -35,9 cash flow 14. Income taxes paid ( ) ( ) -17,3 15. Interest paid ( ) ( ) 43,4 16. Interest received ,5 CASH FLOW FROM OPERATING ACTIVITIES ,9 II. INVESTING ACTIVITIES 1. Purchase of property, plant and ( ) ( ) 185,9 equipment 2. Purchase of intangible assets (59.098) (42.966) 37,5 3. Proceeds from sale of long term ,5 assets 4. Net expenditures/proceeds from ( ) ,1 purchase/sale of financial assets 5. Proceeds from dividends ,3 6. Loans given ( ) ( ) -8,2 7. Repayment of given loans ,9 8. Government grant received ,0 9. Other expenditures/proceeds ( ) ,8 from investing activities CASH FLOW FROM INVESTING ACTIVITIES ( ) ( ) 632,2 Tankerska plovidba Group 9

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12 Notes to the financial statements as at 31 December 2011 (forming part of the consolidated financial statements) NOTE 1: GENERAL INFORMATION TANKERSKA PLOVIDBA d.d. Zadar ( the Company ) is a joint stock company incorporated and domiciled in the Republic of Croatia. The registered office is at Zadar, Božidara Petranovića 4. Company`s shares are quoted on the official market of Zagreb stock exchange. The core business of the Company is: 1. Transport of freight (cargo) over seas and coastal waters 2. Transport of passengers over seas and coastal waters 3. Service activities incidental to sea transportation: Salvage and towage of ships; Supply of ships, boat and yachts with motor fuel; Pilotage in coastal waters of Republic of Croatia; International freight (cargo) transport by road; Wholesale trade and commission trade of ships, ship`s equipment and inventory, technical equipment and spare parts for ship`s maintenance and repair; Import in own name of office equipment, stationery and accessories; Wholesale of crude, liquid and gaseous oils and related products. At 31 st December 2011 the Group had employees: 156 employees in administration, 63 seamen in full time employment and 890 seamen on contract. ( employees: 154 employees in administration, 66 in full time employment and 854 seamen on contract). Up to 9 th of December 2011 members of Supervisory Board were as follows: Svetko Koščica Dragan Gaćina Lenko Milin Ivan Pupovac Mladen Vučetić President Member Member Member Member From 9 th of December 2011 members of Supervisory Board were as follows: Ivan Pupovac Nikola Koščica Luka Kolanović Ivica Pijaca Željko Belić President Member Member Member Member Tankerska plovidba Group 12

13 Up to 1 st of February 2012 members of the Managing Board were as follows: Ive Mustać Ivica Čičmir-Vestić Petar Kragić Chairman of the Board Member of the Board Member of the Board From 1 st of February 2012 and up to publishing of these reports members of the Managing Board were as follows: Lenko Milin Ivica Čičmir-Vestić Joško Jurin Chairman of the Board Member of the Board Member of the Board The ownership structure of the Company at 31 December 2011 was as follows: Number of shares Share of ownership % Silba Participations B.V ,87 PBZ d.d./custodial consolidated client account ,46 Societe Generale-Splitska banka d.d./allianz ZB d.o.o. for AZ Mandatory pension fund ,82 Raiffeisenbank Austria d.d./ R PS ,50 Raiffeisenbank Austria d.d./ RBA ,35 Čičmir-Vestić Ivica ,31 Kragić Petar ,31 Mustać Ive ,31 Milin Lenko ,31 Gaćina Dragan ,31 Others ,45 Total ,00 These financial statements for the year ended 31 st December 2011 comprise of the financial statements of TANKERSKA PLOVIDBA d.d., its subsidiaries abroad (shipping companies operating internationally) that TANKERSKA PLOVIDBA d.d. operates from a single headquarter, under a unique name and management, and for which it is in obligation to keep business books and prepare financial statements for the full operations in the country and abroad according to the article 429. paragraph 3. of the Maritime Code (Official Gazette of the Republic of Croatia no.181/04., 76/07., 146/08. and 61/11.), of the other subsidiaries and of the Group`s interest in associates. At 27 h June 2012 the Board approved the financial statements to be issued to the Supervisory Board. The Board and the Supervisory Board left to the General Assembly to approve the financial statements. Accounting policies given below were applied consistently for all periods presented in these consolidated financial statements. Tankerska plovidba Group 13

14 NOTE 2: PRINCIPAL ACCOUNTING POLICIES Basis of accounting policies applied in the financial statements are listed below: a) Statement of compliance The consolidated financial statements of the Group have been prepared in accordance with laws and regulations of Republic of Croatia and International Financial Reporting Standards adopted by the European Union. The applied accounting policies are unchanged in relation to the previous year. The Group did not adopt any new and changed IFRS and their interpretations which affect financial position, financial result or require additional disclosures in financial statements. Standards, amendments and interpretations adopted by the European Union and the Croatian Board and effective Following new or amended standards and interpretations issued which are or have become effective during the year and had no effect on amounts published in this report: 2010 Annual Improvements to IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13 (effective for annual periods beginning on or after 1 January 2011), 2010 Annual improvements to IFRSs amendments of transitional requirements to IAS 21, IAS 28, IAS 31, IAS 32 and IAS 39 (effective for annual periods beginning on or after 1 January 2011), IAS 24 (amended) Related parties (effective for annual periods beginning on or after 1 January 2011), IFRS 1 First time adoption of IFRS amendments limited exemption from comparative IFRS 7 disclosures for first-time adopters (effective for annual periods beginning on or after 1 January 2011), IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (amendments effective for annual period beginning on or after 1 January 2011), IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after 1 January 2011). Standards, amendments and interpretations to existing standards that are not yet effective At the date of authorization of these consolidated financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective and were not adopted by the Group for the year ended 31 December 2011: IFRS 9 Financial Instruments (new standard effective for annual periods beginning on or after 1 January 2015), IFRS 10 Consolidated financial statements (new standard effective for annual periods beginning on or after 1 January 2013), IFRS 11 Joint arrangements (new standard effective for annual periods beginning on or after 1 January 2013), Tankerska plovidba Group 14

15 IFRS 12 Disclosure of interests in other entities (new standard effective for annual periods beginning on or after 1 January 2013), IAS 27 and IAS 28 (consequential amendments due to above mentioned new consolidation standards - effective for annual periods beginning on or after 1 January 2013), IFRS 13 Fair value measurement (new standard effective for annual periods beginning on or after 1 January 2013), IAS 1 (revised) Presentation of Financial Statements (amendments effective for annual periods beginning on or after 1 July 2012), IAS 19 (revised) Employee benefits (amendments effective for annual periods beginning on or after 1 January 2013), IAS 32 Financial instruments: Presentation amendments to application guidance on the offsetting of financial assets and financial liabilities (effective for annual periods beginning on or after 1 January 2014), IFRS 1 First time adoption of IFRS replacement of fixed dates for certain exceptions (effective for annual periods beginning on or after 1 July 2011), IFRS 1 First time adoption of IFRS additional exemptions for entities ceasing to suffer from severe hyperinflation (effective for annual periods beginning on or after 1 July 2011), IFRS 7 Financial instruments: Disclosures (amendments effective for annual periods beginning on or after 1 July 2011 or 1 January 2013), IFRS 7 Financial instruments: Disclosures (amendments requiring disclosures about the initial application of IFRS 9 effective for annual periods beginning on or after 1 January 2015), IAS 12(revised) Income taxes (limited scope amendment effective for annual periods beginning on or after 1 January 2012). Management anticipates that all of the above stated interpretations and standards will be adopted in the Group s consolidated financial statements for the first period beginning after the effective date of the pronouncement and its application should not have a material impact on the Group s consolidated financial statements. b) Basis of reporting Financial statements of the Group are prepared on the historical cost basis, except for available-for sale financial assets which are stated at fair value. Financial statements of the Group are prepared on a going concern basis. Financial statements of the Group are presented in Croatian Kuna (). The preparation of consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the starting point for making the estimates about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may be differed from these estimates. The mentioned estimates and associated assumptions are the subject of regular reviewed. The influence of the estimate correction is recognised in the period in which the correction of Tankerska plovidba Group 15

16 estimate is done if the correction affects only that period, or in the period of correction and future periods if the correction affects both current and future periods. Consolidated financial statements include the financial statement of TANKERSKA PLOVIDBA d.d. ZADAR and of the following subsidiaries owned by Tankerska plovidba: Shipping companies engaged in international shipping 1. PULZAR MARITIME CORPORATION, MONROVIA, LIBERIA 2. PULZAR MARITIME TWO LIMITED, VALLETTA, MALTA 3. CORISLES SHIPPING CORPORATION LIMITED, MONROVIA, LIBERIA 4. DONAT MARITIME CORPORATION, MONROVIA, LIBERIA 5. DIADORA SHIPPING COMPANY LTD., MONROVIA, LIBERIA 6. RIVA SHIPPING COMPANY LIMITED, MONROVIA, LIBERIA 7. RIVA G. SHIPPING COMPANY LIMITED, MONROVIA, LIBERIA 8. RIVA N. SHIPPING COMPANY LIMITED, MONROVIA, LIBERIA 9. RIVA TANKER SHIPPING COMPANY LTD., MONROVIA, LIBERIA 10. FONTANA SHIPPING COMPANY LIMITED, MONROVIA, LIBERIA 11. PUNTA MARITIME LTD., VALLETTA, MALTA 12. PUNTA TWO MARITIME LTD., VALLETTA, MALTA 13. DALMATIA MARITIME LTD., VALLETTA, MALTA 14. AENONA MARITIME LTD., VALLETTA, MALTA 15. DONAT MARITIME LTD., VALLETTA, MALTA 16. JADERA MARITIME LTD., VALLETTA, MALTA 17. ANASTASIA MARITIME LTD., VALLETTA, MALTA 18. TEUTA SHIPPING COMPANY LTD, MONROVIA, LIBERIA 19. JADERA MARITIME LTD, MONROVIA LIBERIA 20. PUNTA MARITIME LTD, MONROVIA, LIBERIA 21. PUNTA TWO MARITIME LTD, MONROVIA, LIBERIA Other companies 22. ALAN SHIPPING COMPANY LIMITED, LONDON, GREAT BRITAIN 23. RTD D.O.O., ZADAR, CROATIA 24. REKREACIJSKO TURISTIČKI CENTAR NIN D.O.O., NIN, CROATIA 25. STAMBENO GOSPODARSTVO TANKER D.O.O., ZADAR, CROATIA 26. AENONA D.D., ZADAR, CROATIA All stated companies are 100% owned by Tankerska plovidba, except the company Stambeno gospodarstvo Tanker d.o.o. Zadar where Tankerska plovidba d.d. has 33,67% ownership and controlling influence and company Aenona d.d. Zadar where Tankerska plovidba has 55% ownership. Accounting of the companies with registered office in Liberia and Malta is conducted in US$ according to the regulations of the Republic of Croatia, and the accounting of the company with registered office in UK is conducted in GBP in accordance with the UK regulations. Items of the balance sheet and of profit and loss account are translated at middle exchange rate of Croatian National Bank on the balance sheet date, and that was at , for 1 US$ and 8, for 1 GBP ( , for 1 US$ and 8, for 1 GBP). Tankerska plovidba Group 16

17 c) Foreign currencies Transactions in foreign exchanges are translated in domestic currency using middle exchange rate of Croatian National Bank currency prevailing at the date of transaction. Monetary assets and liabilities in foreign currency are translated into domestic currency according to middle exchange rate of the Croatian National Bank valid at the date of balance sheet. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in the income statement within financial revenues or financial expenses. Assets and liabilities, revenues and expenses and cash flows of foreign entities are translated into domestic currency according to the middle exchange rate of Croatian National Bank valid at the end of the year, except in the case of significant currency fluctuations during the period, when the currency exchange rate on transaction date is applied. All resulting exchange differences are recognised in a separate component of equity. Exchange differences resulting from the translation of the net investment in foreign entities are included in equity under translation reserve. At the sale of foreign entity, exchange differences are recognized in the income statement. d) Intangible assets Goodwill arising on acquisition represents the excess of the cost of a business acquisition over the fair value of the Group`s share of net identifiable assets of the acquired subsidiary or associate at the date of acquisition. Goodwill arising on the acquisition of the subsidiary is treated as intangible assets. In respect of associate, goodwill is included in the carrying amount of the investment in the associate. Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash generating units and tested annually to determine impairment. The allocation of goodwill is made to those cash generating units expected to benefit from the business combination in which the goodwill arose. When the Group disposes of an operation within a cash-generating unit, the goodwill associated with the operation disposed of is: included in the carrying amount of the operation when determining the gain or loss on disposal and measured on the basis of the relative values at the date of disposal of the operation disposed and the portion of the cash- generating unit retained. Intangible assets acquired by the Group, with a finite life of application, are stated at cost less accumulated depreciation and impairment of assets. Intangible assets consists of software whose estimated use and the expected lifetime is 5 years. Subsequent expenditure is capitalised only if it is probable that it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the income statement as an expense as incurred. Depreciation is recognised in the income statement on a straight-line basis over the estimated useful life of intangible assets from the date on which they are available for use. Tankerska plovidba Group 17

18 e) Property, plant and equipment Items of property, plant and equipment, that meet the criteria for recognition as an asset, are stated at cost. Cost includes all costs directly attributable to bring the asset to a working condition for its intended use. After the initial recognition as assets, a single item of property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Gains and losses from disposal of the property, plant and equipment are recognized within other revenues or expenses in the income statement depending on achieved results. When revaluated assets are sold, the amounts included in revaluation reserves are transferred to retained earnings. Subsequent expenditures related to the already recognized item of property, plant and equipment, are capitalised as an increase in value of property when it is probable, that because of these additional costs, will accrue additional future economic benefits and when these expenditures improve the condition of the property beyond the originally recognized. All other subsequent expenditure is recognized as an expense in the period incurred. Depreciation is carried out separately for each major asset (vessels) according to the depreciation age of 16 years for tankers and 20 years for bulk carriers less for scrap value, taking in consideration the work in three shifts according to the decision of the Supervisory Board at the Fourth meeting in Depreciation is calculated according to the expected lifetime of use and rates derived from it, depending on the group and subgroup of tangible assets, applying the straight-line method. Depreciation is calculated within the rates established by the Profit Tax Act (Official Gazette of the Republic of Croatia, 177/04., 90/05., 57/06., 146/08. and 80/10.): - Buildings 2% - Transport vehicles 20% - Computers and telecommunications equipment 25% - Office equipment 20% - Furniture 10% Depreciation starts in the month following the month in which the asset is ready for its intended use. Land is not depreciated as it is considered to have an unlimited lifetime. Assets in the course of construction represent unfinished property and are carried at cost. f) Investment in subsidiaries and associates Subsidiaries are entities in which the Company has the power, directly or indirectly, to exercise control over their operations. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefit from its activities. Financial statements of subsidiaries are included in consolidated financial statements from the date that the control commences until the date that control ceases. Tankerska plovidba Group 18

19 Associates are entities in which the Group holds between 20% and 50% of voting rights and has significant influence, but which it does not control. Significant influence is the power to participate in the financial and operating policy decisions of the investee but it is not control or joint control over those policies. Investments in associates are accounted for by the equity method of accounting. All intra-group transactions between Group entities are eliminated in full on consolidation. g) Financial assets Investments are classified in the following categories: investments held-to-maturity, investments held-for-trading and investments available-for-sale. Investments with fixed or determinable payments and with fixed maturity in which the Group has a positive intent and ability to hold to maturity, with exception of loans and receivables derived from the Group, are classified as held-to-maturity. Investments acquired principally for the purpose of generating a profit from short term fluctuations in price, are classified as investments held-for-trading. All other investments, except loans and receivables derived from the Group, are classified as available-for-sale. Investments available-for-sale are classified as current assets if the Group has the intention of holding the investment for less than 12 months from the balance sheet date. Each investment sale and purchase is recognized on settlement date. Investments are first recorded at cost, and that is fair value of compensation given for them, including transaction costs. Investments available-for-sale and investment held-for-trading, after the initial recognition are recorded at their fair value with no reduction for transaction cost, based on their market price at the balance sheet date. Gains or losses arising from fair value adjustment of investments available-for-sale, are recognized directly in the reserves which are recorded for this purpose, until the investment is sold or otherwise disposed, or till it is considered impaired. At the time of sale the cumulative gain or loss previously recognised in capital (reserves) is recognised in net profit or loss for the corresponding period. Financial assets and financial liabilities are recognized in the Group`s balance sheet when the group becomes party to the contract of financial instrument. Although, in the case of normal sale or purchase (sale or purchase of financial assets under the contract which terms require delivery of the assets within the period established by legislation or agreement on the organised market), the date of settlement is essential for initial recognition or non-recognition. Financial assets are derecognized when the money is collected or the rights to receive the money from assets expired. Financial liabilities are derecognized when the contracted liabilities are cancelled or the term for recognition expired. h) Inventories Inventories are measured at the lower of cost or net realizable value. Stocks of materials, spare parts and small inventory are stated at purchase costs. Tankerska plovidba Group 19

20 Cost of material and spare parts are based on first- in, first- out basis. Small inventory is written off entirely following the start of use. The purchase cost includes the costs of purchase of inventory and the costs incurred in bringing the inventories to their present location and condition. i) Receivables Receivables represent the right to collect determined amounts from customers or other debtors with regard to the Group's operations. Receivables from the customers and other receivables are stated at fair value of given compensation and are recorded at depreciation cost, after correction for impairment value. Impairment correction of bad and disputed receivables is done individually for each receivable when the payment of partial or total due amount of receivables based on management estimates is uncertain. j) Impairment of assets The carrying amounts of the Group s assets, other than inventories and deferred tax assets, are reviewed at each reporting balance sheet date to determine whether there is any indication of impairment. If any such indications exists, the asset`s recoverable amount is estimated. Assets that are subject to deprecation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized in the profit and loss account whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Such impairment losses are shown in the income statement. For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. Impairment losses recognised in respect to cash generating units, are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units), and then proportionally to reduce the carrying amount of other assets in the units (or group of units). When a decline in the fair value of an available-for-sale financial assets has been recognized directly in equity, and there is objective evidence that the assets is impaired, the difference between the acquisition cost (net of equity repayments and amortization) and current fair value, less impairment losses previously recognized in income statement, is transferred from equity into income statement. The recoverable amount of the Group investment in held-to-maturity securities and receivables carried at depreciation cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (that is, the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated cash flows are discounting to their Tankerska plovidba Group 20

21 present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset. For an asset that does not generate independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. An impairment loss related to held-to-maturity security or receivables carried at cost or amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss in respect of an investment in an equity instrument classified as availablefor-sale is not reversed directly in income statement. Reversal of the impairment loss of assets is directly approved to the equity. If the fair value of a debt instrument classified as available-for sale increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in the income statement, then the impairment loss is reversed, and the reversed amount is recognised in the income statement. An impairment loss in respect of goodwill is not reversed. In respect to other assets, an impairment loss is reversed when there is an indication that the impairment losses recognised in prior period (assessed at each balance sheet date) have decreased or may no longer exist. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to extent that the asset`s carrying amount does not exceed the carrying amount that would have been determined, net of deprecation or amortisation, if no impairment loss had been recognised. k) Cash and cash equivalents Cash and cash equivalents, for the purpose of the balance sheet and the statement of cash flows, consist of cash on hand and balances with banks, and highly liquid investments that are easily converted to known cash amounts with original maturities of three months or less, and which are subject to insignificant risk of changes in value. l) Share capital Share capital consists of ordinary shares. Direct dependent costs associated with issuance of ordinary shares are recognized as a reduction of capital. The amount paid for the purchase of share capital, including direct dependent costs, is recognized as a reduction in capital and reserves. Purchased own shares are classified as treasury shares and are a deductible item of the total capital and reserves. m) Interest bearing liabilities Interest bearing liabilities are measured initially at fair value of the proceeds received, less attributable transaction costs. In subsequent periods, they are stated at amortised cost using the effective interest method. All differences between proceeds (net of transaction costs) and Tankerska plovidba Group 21

22 the redemption value are recognised in the income statement over the period of the borrowings using the effective interest rate method. n) Provisions A provision is recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources which constitute the economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. The amounts of provisions are determined by discounting the expected future cash flows at a pre-tax discount rate that reflects current market assessments of the time value of money and, where applicable, the risk specific to the liability. o) Trade and other payables Trade and other payables are initially measured at fair value and then subsequently at amortised cost. p) Employee benefits Contributions to the mandatory pension fund are included as cost in the income statement at the period in which they are incurred. A liability for employees benefits is recognised in provisions based on the Group`s formal plan and when past practice has created a valid expectation by the Management Board or key employees that they will receive a bonus and the amount if bonus can be determined before the time of issuing the financial statements. Liabilities for bonus are expected to be settled within 12 months of the balance sheet date and are measured at the amounts expected to be paid when they are settled. Short-term employee liabilities are not discounted and are recognised as an expense when the service is provided. Provision is recognized in an amount which is expected to be paid as a current cash bonus or profit distribution plan if the Group has a present legal or constructive obligation to pay that amount as a result of performed service in the past by the employee and if the obligation can be reliably measured. q) Revenue recognition Sales, which are reported net of returns, rebates and discounts, as well as net of taxes directly connected with the sale of products and services rendered, represent amounts invoiced to third parties. Revenue is recognized at the time when services are rendered, and the company dispatches goods, or performs service as this is the point at which significant risks and rewards of ownership of the goods are transferred to the customer. Revenue from services is recognised according to the stage of performed service, namely when there is no significant uncertainty regarding the provision of service or associated costs. Tankerska plovidba Group 22

23 Revenues from freight are realized in two basic forms: time charter and voyage charter. Revenues from time charter are covered by the method of the contract completion as there is no uncertainty concerning the compensation for done service since T/C rent is paid in advance for the agreed period of 15 days or for a month. The same method is applied to voyage charter. r) Leases Leases of property, plant, equipment and intangible assets where the Group accepts all the benefits and risks of ownership are classified as financial leasing. Financial leasing is capitalised at the estimated present value of the related lease payments. Each lease payment is allocated to the liability and financial expenses in order to obtain a constant rate on the remaining financial situation. The corresponding liability for the rent, reduced for the financial expenses are recorded in other non-current liabilities. Interest component of the financial expenses is charged to the income statement over the lease period. Property, plant, equipment and intangible assets acquired according to the contract of financial leasing are depreciated over the useful life of assets. Leases of assets where lessor retains the benefits and risks of ownership are classified as operating leasing. Operating lease payments are recognized as an expense on a straight-line basis over the lease term. If the operating lease terminates before the expiration of the lease term, all payments to the lessor in the form of penalty, are recognized as an expense in the period in which the termination occurred. s) Net financial (expenses) / revenues Net financial (expenses) / revenue comprise of interest payable on borrowings and loans, interest on invested funds, dividend income, foreign exchange gains and losses, gains and losses of financial property fair value changed stated in the income statement at fair value. Interest income is recognised in the income statement as it accrues, taking into account the effective yield on the asset. Dividend income is recognised in the income statement on the date that the Group`s right to receive dividend payments is established. t) Taxes Corporate income taxes are computed under the laws and regulations of the country in which the respective Group company is registered. Corporate tax for the year comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date and all adjustments to tax payable in respect of previous periods. Deferred tax is calculated using the balance sheet liability method, providing for temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amount used for taxation purposes. The amount of deferred tax is based on the expected realisation or settlement of the carrying value of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. Tankerska plovidba Group 23

24 A deferred tax assets is recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. u) Dividends Dividends are recognised in the statement of changes in equity and disclosed as liability in the period in which were approved by the Company`s shareholders. v) Government grants Government grants related to the assets purchase of vessels is presented in the balance sheet as a deductible item in calculating the carrying value of the assets. Government grant is recognized as income over the useful life of the assets which is depreciated, by reduction of depreciation costs. Government grants related to the assets purchase of vessel received after delivery of vessels are presented in the balance sheet as deferred income. Government grant is recognized as income in periods and ratios in which it is depreciated. z) Comparatives Comparative figures have been adjusted to conform to presentation in the current year, where necessary. Tankerska plovidba Group 24

25 NOTE 3: SALES REVENUE Freight on domestic market 0 0 Freight on international market from that : time charter voyage charter Sales revenue - related companies TOTAL NOTE 4: OTHER REVENUES Revenue from rent Written-off receivables collected Revenue from revaluation reserve release Revenue from insurance Gain from sale of property, plant and equipment Revenue from government grants Other revenue TOTAL Gain from sale of property, plant and equipment is mostly related to profit from sale of vessel Sali after deducting its net carrying value and sale related expenses ( ). NOTE 5: OPERATING COSTS AND COSTS OF GOODS SOLD Consumption of raw materials Energy used Costs of goods sold Small inventory cost TOTAL Tankerska plovidba Group 25

26 NOTE 6: PERSONNEL COSTS Net salaries of employees in full employment Wages of seamen on contract Taxes and contributions paid from salaries Contributions on salaries Severance compensations Reimbursement to employees (travel expenses, daily allowance) TOTAL NOTE 7: DEPRECIATION Depreciation of intangible assets: at regular rates Depreciation of property, plant and equipment: at regular rates revaluation reserve release TOTAL NOTE 8: OTHER COSTS Transport and postal services Maintenance Rent Port expenses Agency fees Costs of loading and unloading cargo Commission to brokers and agents Insurance premiums Banking services Donations Loss on sales of long term assets Other TOTAL Tankerska plovidba Group 26

27 NOTE 9: NET FINANCIAL (EXPENSES)/ REVENUES Financial revenues Interest Interest related companies (Note 22) 0 0 Dividend revenue Revenue from share in profits related companies (Note 14) Net foreign exchange gains Other financial revenues Profit from sale of securities Total financial revenues Financial expenses Interest ( ) ( ) Net foreign exchange losses 0 0 Other financial expenses 0 0 Losses from disposal of shares- 0 0 related companies Total financial expenses ( ) ( ) NET FINANCIAL (EXPENSES)/REVENUES ( ) NOTE 10: INCOME TAX By article 429. subsection 1. of Maritime Code ( Official Gazette of the Republic of Croatia no. 181/04., 76/07., 146/08. and 61/11.) it is prescribed that the companies that are registered and carry out shipping activities do not pay income tax realized by the ships engaged in international shipping. According to the provisions of the article 429. subsections 2. and 3. of the Maritime Code the companies from subsection 1. of the same article do not pay income tax realised from sale of ships, from sale of shares in shipping companies which operate in international shipping, as well as on any income from dividends on shares they have in shipping companies which operate in international shipping. If the companies from subsection 1. manage these interests from a single seat of management, under unique name and leadership, they are obligated to maintain accounts and prepare financial statements for the business at home and abroad. Following the above stated, according to the tax return for 2011 the Company had no obligation to pay income tax in Croatia. Tankerska plovidba Group 27

28 Income tax refers to the income tax of the company Alan Shipping Company Limited in United Kingdom in the amount of ( : ) and the company Stambeno gospodarstvo Tanker d.o.o. Zadar in the amount of ( : ). The company Aenona d.d. Zadar according to the tax return for 2011 had no obligation to pay income tax ( : 2.794). Tax losses of the subsidiaries expiry 5 years after the year in which they are incurred. Availability of tax losses in future periods for the Group is as follows: Tax losses from expiry Tax losses from expiry Tax losses from expiry Tax losses from expiry Tax losses from expiry Tax losses from expiry Tax losses from expiry Tax losses which cannot be carried forward ( ) ( ) TOTAL NOTE 11: EARNINGS PER SHARE Profit /(loss) for the year ( ) Weighted average of total numbers of shares at year end Profit /(loss) per share () (144,65) 129,58 The Group states basic earnings per share for ordinary shares. Basic earnings per share is calculated by dividing profit (loss) for the year applicable to ordinary shares with average number of ordinary shares during the period. Basic and fully diluted earnings per share are equal since the Group does not have diluted potential ordinary shares. Tankerska plovidba Group 28

29 NOTE 12: INTANGIBLE ASSETS Cost Goodwill Intangible assets Intangible assets under construction Total At 1 January Increases Transfer of assets under (43.125) 0 construction Reductions (6.395) (6.395) Effects of FX differences At 31 December At 1 January Increases Transfer of assets under ( ) 0 construction Reductions (5.581) (5.581) Effects of FX differences At 31 December Accumulated depreciation and impairment losses At 1 January Charge for the year Impairment losses Reductions (5.329) (5.329) Effects of FX differences At 31 December At 1 January Charge for the year Impairment losses Reductions (4.651) (4.651) Effects of FX differences At 31 December Carrying value At 1 January At 31 December At 1 January At 31 December Non tangible assets under constructions refer to investment in project Medical Tourism Centre Nin. Tankerska plovidba Group 29

30 NOTE 13: PROPERTY, PLANT AND EQUIPMENT Land and buildings Plant and equipment Investment in property Assets under construction Total Cost At 1 January Increases Transfer of assets under ( ) 0 construction Reductions ( ) ( ) Effects of FX differences At 31 December At 1 January Increases Transfer of assets under ( ) 0 constructions Reductions ( ) ( ) Effects of FX differences At 31 December Accumulated depreciation and impairment losses At 1 January Charge for the year Impairment losses Reductions ( ) ( ) Effects of FX differences At 31 December At 1 January Charge for the year Impairment losses Reductions ( ) ( ) Effects of FX differences At 31 December Carrying value At 1 January At 31 December At 1 January At 31 December No borrowing costs have been capitalized during 2010 and Assets under construction include costs of building ships product tankers no. S-5054, S-5065 in the amount of and commercial building constructions costs Central warehouse at Gaženica in the amount of Tankerska plovidba Group 30

31 In 2011 the Group took delivery of following vessels: Product/chemical tanker dwt t m/t Velebit (newbuilding no. 711); Product/chemical tanker dwt t m/t Vinjerac (newbuilding no. 712). At 31 December 2011 the net carrying amount of leased assets is (2010.: ). Total net carrying amount of the assets over which there is a mortgage as security for the loans is (2010.: ). NOTE 14: INVESTMENTS IN ASSOCIATES Net carrying amount of investment in associates includes: 1. Shipyard Viktor Lenac d.d., Rijeka, Croatia 31 December December Amount in Ownership part % Amount in Ownership part % ,41% ,34% TOTAL The company participated in increase of share capital of company Shipyard Viktor Lenac d.d., Rijeka by payment in cash amounting to , whereby increasing its ownership share to 48,41%. Changes of investments in associate of the Group during the year were as follows: Net carrying value Investment cost Share in profit of associate in Share in profit of associate in Share in profit of associate in Share in profit of associate in Carrying value of investment Abbreviated version of financial information of associate: Total assets Total liabilities Revenues Profit Tankerska plovidba Group 31